Photo taken on Nov. 25, 2019 shows a newly-built city area in Istanbul, Turkey. The Turkish government's optimism for an economic recovery amid high inflation and economic contraction since the end of last year lacks solid foundation, analysts said, warning that the year 2020 could prove quite challenging as well. (Xinhua/Xu Suhui)
ISTANBUL, Nov. 24 (Xinhua) -- The Turkish government's optimism for an economic recovery amid high inflation and economic contraction since the end of last year lacks solid foundation, analysts said, warning that the year 2020 could prove quite challenging as well.
What the latest indications only show is that the shrinkage in economy has stopped, but a genuine recovery is a long way off, Gokhan Capoglu, an economist, told Xinhua.
At the end of last month, the Turkish Central Bank lowered its inflation projection for 2019 to 12 percent, down from 13.9 percent.
Turkish Treasury and Finance Minister Berat Albayrak recently expressed his expectation for an upturn in the economy, saying the preliminary indicators of a recovery in the third quarter will further improve in the final quarter of 2019.
The government expects the crisis-hit economy, which contracted in the last three quarters, to grow 0.5 percent this year.
However, official economic figures are highly contested by Turkey's opposition parties and some analysts who maintain that the figures may well have been tampered with.
"There is no significant recovery in the economy, but the government is simply successful in managing public perception," remarked Capoglu, who heads the Ankara-based Anatolian Strategic Research Foundation.
Maintaining that the growth in production is in no way big enough to achieve a 0.5-percent growth this year, he said that "the business is rather slack and the unemployment is rising."
The Turkish economy shrank by 3 percent year-on-year in the last quarter of 2018, and by 2.6 percent and 1.5 percent in the first and second quarters of this year respectively.
"It's almost impossible to achieve a positive growth this year without juggling the figures, given that the economy contracted by around 2 percent in the first half of 2019," Ugur Civelek, an economic analyst, told Xinhua.
The economy has been giving signs of distress since the end of 2016 when the Turkish lira lost big in value against the U.S. dollar and the euro.
"I don't think the year 2019 is a year of economic recovery at all," said Civelek, who writes columns for the Aydinlik daily.
"There has been no significant increase in domestic demand, investments or in the flow of foreign capital into the country, without which no recovery is possible," he explained.
After being hit in August last year by a major currency crisis resulting from tension in ties with the U.S., the economic crisis has made itself felt much stronger.
A 3.8-percent decrease year-on-year in investments in the third quarter of 2018 was followed by a sharp decline of 12.9 percent in investments in the final quarter of 2018.
In 2019, the investments dropped by 12.4 percent and 22.8 percent in the first and second quarters respectively.
The government expects the economy to grow by 5 percent in 2020, something which is not feasible, according to the analysts.
"The year 2020 will be a very tough one with the risk of deepening structural problems such as soaring unemployment and a huge budget deficit," Capoglu said.
"If the risks in the economy are not kept in check, social unrest may also break out," he cautioned.
"The budget deficit will enormously swell in 2020," Civelek said, arguing the interest rates and the Turkish lira would not be able to maintain their current levels either amid expected deterioration in the economy.
"In 2020, Turkey will be one of the most fragile economies in the world amid global economic slowdown," he remarked.
Turkey is already expected to have a record-high budget deficit of 140-150 billion Turkish liras, or around 26 billion dollars, this year.
The unemployment rate hit 14 percent in August, the highest in the past 15 years. The unemployment among young people aged 15-24 is even more alarming, as it hit 27.4 percent with a 6.6-percentage-point increase year-on-year.
The rate of young people who neither have a job nor are in school is as high as 30.1 percent, while over a quarter of university graduates are unemployed.
"How will these people remain hopeful for a bright future?" remarked Capoglu.
Three families have committed suicide recently in Turkey due to severe financial problems, according to press reports.
The Organization for Economic Co-operation and Development (OECD) on Thursday revised its September projection of 0.3-percent contraction for the Turkish economy to 0.3-percent growth in 2019.
"The OECD's projection is politically motivated," Civelek stated, saying the revision is part of an effort by the group to "eliminate the global negative outlook."
Amid global economic slowdown, the world economy risks falling into recession next year.
"No recovery in the Turkish economy is possible without the global economy picking up first," remarked Civelek.
Turkey has a short-term foreign debt of 121.3 billion dollars, which rose by 6 percent in September from the end of last year.
The Turkish government boasts of highest-ever current account surplus in years, but it is closely linked with lack of foreign loans and diminishing investments.
Turkey traditionally suffers from a serious savings gap and needs big foreign loans to pay debts and make investments.
What makes the Turkish economy particularly fragile is the difficulty in attracting foreign loans, Civelek said.
"Despite knowing this, the autonomy of the Central Bank has been eliminated," he added, referring to the removal in July of the head of the Central Bank by President Recep Tayyip Erdogan, who recently revealed that the governor was fired as he did not toe the president's line.
"The banking system does not function any longer according to market rules," Civelek said of the government's interference in the functioning of public banks and the Central Bank in particular.
Since its governor was replaced, the central bank has boldly decreased the key interest rate to 14 percent, down from 24 percent, to stimulate the economy.
